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State of the Industry Report: Path to success in 2023

December 14, 2022 -  By , and
(Illustration: ulimi/DigitalVision Vectors/Getty Images)

(Illustration: ulimi/DigitalVision Vectors/Getty Images)

During the Supply Chain Hacks seminar at Equip Expo 2022, panelists were asked for their forecast for 2023. How much longer would there be supply chain interruptions? How will the market react to inflation? Will the industry keep chugging along like it has these last few years?

“If we had a really good answer to what you’re asking, a perfect answer?” George Kinkead, president of Turfco, responded, “We probably wouldn’t be on this panel, because we’d be in the investment banking world.”

While the future is difficult to predict, one thing we learned after asking dozens of experts — including boots-on-the-ground landscape and lawn care business owners, industry suppliers and consultants — though the market is volatile, the need and appreciation for the industry remains high.

“There are many bright spots (for the industry),” says Marty Grunder, CEO of The Grow Group and Grunder Landscaping Co. “The brightest one is the impact that landscaping makes on our lives. The work we do is respected and appreciated and that’s a great thing.”

Part I: 2022 in the rearview

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Greg Herring

In late 2022, LM columnist Greg Herring, CEO of the Herring Group, an operational and strategic finance consultancy, released his annual Benchmark Report. Herring described it as a bit of good news and a bit of bad news. His report is based on in-depth feedback from 150 companies in the industry.

“On the good side, the average company growth rate was about 20 percent, which is almost identical (to 2021),” Herring says. “So what that means is the average company is going to double in size in 3 1/2 years.”

The bad news came, not unexpectedly, in the average profit column.

“Companies that were greater than 10 percent profitable weren’t as profitable as they were last year,” Herring says. “The average last year was a 6.1 percent profit margin. This year was a 4.9 profit margin. The other bit of bad news was that there were more companies that lost money this year. Last year, about 15 percent of respondents lost money. This year, about 21 percent of companies lost money.”

Herring adds fuel costs and inflation are two of the reasons that 2022 turned out to be a challenging year.

“We had some clients implement fuel surcharges and that’s a big help, but it is hard to respond quickly and get it all organized and communicated,” he says. 

Herring will dive deeper into this report in the next two issues of Landscape Management.

Taking smart risks 

(Graphic: LM Staff)

(Graphic: LM Staff)

Thankfully, gas prices retreated somewhat after peaking in June. But considering how volatile the price and availability of basic needs to run a business were, like fertilizer or heavy equipment, it was paramount to maintain open communication with clients.

“The biggest challenge facing landscape businesses will be transparency, keeping clients informed about supplies, the increased costs and managing potential misinformation,” says Jeff Korhan, a Duct Tape Marketing-certified consultant and LM columnist. “In times like this it’s easy to pass along the increased costs of doing business because there will be little resistance from those who need to get the work done. Those who feel they were not treated fairly will have a lot to say about that when conditions change.”

Adds Herring, companies that proactively raised prices set themselves on a successful path for 2023.

“Many companies have adjusted their pricing to reflect current and future inflation,” Herring says. 

Fellow LM columnist Ben Gandy, principal with Envisor Consulting, describes the 2022 economy as “volatile.” He foresees a similar economy in 2023, which might not all be bad.

“A bright spot is fuel costs are coming down,” Gandy says. “A recessionary period might mean the labor market loosens and inflation slows. The level of profitability and professionalism is higher than it’s ever been. It’s a good time to take a smart risk.”

(Graphic: LM Staff)

(Graphic: LM Staff)

In regard to smart risk, Bob Mann, senior director of technical and regulatory affairs for the National Association of Landscape Professionals (NALP) and an LM columnist, mentions the increased attention venture capitalists have given the green industry.

“As this trend continues, it provides incentives for new players to enter the industry,” Mann says. “For some employees, the consolidation that comes with mergers and acquisitions can be painful in the short term, but many new businesses are propagated by former employees of acquired firms. This provides new opportunities for industry growth not only for the new entrepreneurs but also for industry professionals looking to further their growth.”

Stick to the plan

(Graphic: LM Staff)

(Graphic: LM Staff)

Over the last 10 years, LM has asked readers to describe the state of the market. Choices were “Very or relatively healthy,” “flat” and “slightly or significantly down.” 

Last year 78 percent of readers said the industry was healthy. This year that number dipped 10 points to 68 percent. 2018 was the highest score over the last 10 years, when a whopping 92 percent of respondents said the industry was healthy.

Gandy says he isn’t surprised to see this number dip. He believes readers are preparing for more challenges in 2023, and are savvier than ever when it comes to overcoming those obstacles that can hinder a successful operation.

“The economy is likely to stay volatile. Domestic and international politics are contentious, driving uncertainty. Labor is likely to remain scarce,” Gandy says. “Invest energy into your human resource plans and stay away from low-margin work; labor is too hard to come by. Develop a strategic plan and stick to it.”

Part II: Outlook on 2023

TD Bank surveyed equipment dealers and distributors at the 2022 Equip Expo to get a pulse on the industry. Mike Rittler, head of retail card services at TD Bank says findings from the survey show mixed expectations from dealers. Rittler says, though, dealers are optimistic about 2023. Supply chain and economic uncertainty are at the top of dealers’ minds. Only 12 percent of dealers expect to see a decrease in sales in 2023.

Rittler acknowledges that as interest rates increase, unemployment has remained level, so he says it’s a challenge to get a true read on how 2023 will play out.

 “When you talk about state of the industry and outlook, I think the word murky is a great word,” he says. “There’s indicators all over the place right now. As long as the state of the consumer confidence stays strong, then we should feel pretty confident in the demand that will be created by that. And that’s, to me, the key.”

(Graphic: LM Staff)

(Graphic: LM Staff)

The Conference Board, a nonprofit think tank, releases monthly data on consumer attitudes, buying intentions, expectations for inflation and more. For the latest consumer confidence numbers, visit here.

Not slowing down

(Graphic: LM Staff)

(Graphic: LM Staff)

While supply chain issues, water woes and inflation plagued the industry in 2022, Tony Nasrallah of Ground Works Land Design in Westlake, Ohio, says his motto for 2023 is “not slowing down.” 

Ground Works offers maintenance and design/build services for high-end residential and commercial clients and commercial snow and ice management. Nasrallah recently opened an artificial turf wholesale franchise, Purchase Green Cleveland. As Ground Works saw an uptick in interest from clients, he says he wanted to get ahead of the curve.

“I’m going to keep growing this business and I’m not going to stop,” he says. “We’re still in high demand. We’re already booking up for next year and I’m talking to people for the following year, as well.”

He expects a little bit of a slowdown in demand with high interest rates going into 2023, but he also sees opportunities as more homeowners opt to stay put and remodel. 

“I don’t see any crazy change in the market that we haven’t had to deal with already, and I feel good about next year,” he says. “There are always ups and downs, especially in this landscaping business. You just have to muscle through and maintain a positive attitude and bright view for the future.”

Tony Nasrallah

Tony Nasrallah

Nasrallah, who started Ground Works in 2009 in the middle of the Great Recession, is bullish about 2023.

“I’m not scared of next year,” he says. “I’ll keep my ears open and pay attention to what’s going on, but I’m not slowing down and that’s exactly why I made the decision to double down and add Purchase Green Cleveland to our family of businesses. I encourage anyone in my position to take full advantage of all the great opportunities that are available.”

Seeing the potential

David McCary also sees a lot of potential. He recently purchased Seattle Sustainable Landscapes, a full-service commercial and residential maintenance and residential design/build operation. McCary left a job in the tech sector.

He says with the influx of young software engineers to the Seattle area, there’s ample opportunity for a sustainably-minded landscaping operation.

As for some of the challenges the green industry faces — labor, supply chain and inflation — McCary takes a more big-picture approach. McCary takes a big-picture approach thanks to his experience outside the green industry.

“There’s labor shortages everywhere,” he says. “Problems create opportunities. … It’s hard for customer to get people to consistently show up on their property, which means there’s an opportunity for somebody like me if I can do a good job to fill in that gap and create a phenomenal experience for my customer.”

(Graphic: LM Staff)

(Graphic: LM Staff)

For example, McCary, 34, says young Seattleites want more automatic buying options. With his background in technology, he sees ample opportunity to offer a tech-based subscription option for services.

“I think the industry can do a better job of being modern in terms of the consumer experience,” he says. “My generation wants to have an app, wants to be able to interact with something online, not necessarily talk to a person, especially on the maintenance side. So you can do something online and automated, via whatever messaging platform, communication platform, customer service platform.”

McCary also sees some noise restrictions or gas-powered engine bans for the future of Seattle, much like in California.

“It’s a bright spot that we get to play a role in that,” he says. His operation offers services utilizing battery-powered equipment and sustainably sourced landscape materials.

McCary says 2023 presents a lot of unknowns, including talk of recession and high interest rates. These factors will likely lead clients to reconsider existing landscape contracts, he says.

Looking into 2023, McCary has one thing planned: automation. He’s planning to streamline the processes and systems he inherited from the company’s previous owner, add CRM software and automate some communication with clients.

“We do want to grow and I believe there’s going to be an opportunity — even if the industry is down — for me to grow without a doubt. There’ll be opportunities for us to take some of the business from our competitors and just communicate our story more clearly to consumers.”

Irrigation outlook

Max Moreno

Max Moreno

Max “Aqua Max” Moreno, vice president of water conservation with Harvest Landscape Enterprises in Anaheim, Calif., says 2023 is all about water management. He expects more and more landscape operations to focus on water management. 

Moreno says he’s currently working with Harvest Landscape’s more than 400 clients to create 2023 water management plans. The cost of water continues to go up. 

“Going in to 2023, it is one of those things where the operating costs are increasing and the water resources are dwindling,” he says. “Putting together the budgets and allocations is very key for a lot of the landscape companies.”

He says technology is going to play a bigger role with a dwindling workforce in the green industry.

“We’re heavily investing into training them, educating them, because having a more efficient labor force is going to help us to reduce some of those costs,” he says. 

Training needs to be a major focus in 2023, he says. He spends time as a Qualified Water Efficient Landscaper (QWEL) instructor to ensure a solid future for the industry. 

“Because we all do get lumped into the same situation,” he says. “So it’s not where A, B and C company do a good job. If we don’t get A, B, C, D, E and F company all aligned, then it affects all of us.”

Part III: 2024 and beyond

Ben Collinsworth

Ben Collinsworth

It might be scary to think about what the industry will look like next year, let alone 2033. 

But according to industry experts like Ben Collinsworth, general manager of Yellowstone Landscape in Austin, Texas, if you aren’t thinking about the future now, you might already be behind the eight ball.

“Many contractors don’t want to think about (the future) and have to create a new way of operating, but it’s coming, whether you like it or not,” says Collinsworth. “You’re either going to benefit from it, or it’s going to roll you over.”

 

Widespread automation and battery power

Collinsworth says he is a firm believer in technologies like automation and battery power.

“I try to tell (landscape professionals) to get this idea of affordability out of your head (with automation and battery power),” he says. “You might pay more upfront, but you will operate more efficiently in the long run, and it will cost less per acre to mow. I mean, it’s a no-brainer to me as far as a return on investment.”

On the side of battery-powered equipment, Collinsworth acknowledges that the most common concerns that professionals have — longevity and productivity — are legitimate. He also says they shouldn’t scare pros away from what he believes will be a winning technology.

He points to features like battery management systems (BMS) as a way to overcome both of those concerns.

(Graphic: LM Staff)

(Graphic: LM Staff)

Engine brand Vanguard already implements these systems into the batteries it produces. Vanguard’s BMS, according to Randy Lockyear, senior director of commercial turf sales for parent company Briggs & Stratton, offers professionals more up-to-date data on the battery state.

“There are some misconceptions about the safety and reliability of batteries,” he says. “(The BMS) constantly monitors voltage levels and temperature within the battery. Another misconception is that you have to sacrifice power for safety. The lithium-ion batteries Vanguard utilizes have a higher energy density which provides more power density within a smaller physical footprint.”

Alongside benefits like a decrease in necessary maintenance, less noise pollution and less harmful fumes and emissions, Lockyear and Collinsworth see battery power as a technology professionals will implement more widely over the next decade.

“You can see where it’s going from the early technology we’ve seen,” Collinsworth says. “I think a majority of companies will have some participation in autonomous mowers and battery-powered equipment as it rolls out over the next five to 10 years.”

Collinsworth sees both smaller autonomous mowers — like Husqvarna’s Automowers — and larger ones — like Scythe’s M.52 — as ways professionals will make their business more efficient in the future. That belief is thanks to the data that both solutions can offer professionals.

Learning from data

Collinsworth relates running a successful landscaping business to coaching a football team. Like a football team, companies can gain invaluable insights from data.

“When you send the crew out, it’s like having offense go out on the field,” he says. “You don’t just say, ‘Hey, get a touchdown,’ you give them a play. And then, after the game’s over, you review what the film looks like versus the plan you put together.”

As more data becomes available with further advancements in technology Collinsworth believes in-depth planning will be a more accessible task for landscape pros thanks to automation.

“Guys like Ben Gandy have been using flow maps and production maps charts for a long time. Other industries do it a lot in production too, but we just don’t,” says Collinsworth. “It’s a lot of work. And then, to go and measure the guys against that plan is a monumental task. I’ve done it, and it’s not easy.”

Collinsworth expects it will take time for these technologies to gain a foothold in the industry. 

“It takes the person to step back and say, ‘Oh, that’s what we’re doing wrong,’ or ‘This is what we do better, or our production plan is wrong, and the crew does it better.’” he says. 

Healthy turf matters

Ben Pease

Ben Pease

As the future becomes more unpredictable, so will the cost of doing business says Ben Pease, turfgrass agronomist with The Andersons Plant Nutrient Group. 

“Even if the price of our raw fertility materials stays the same, we’re seeing LCOs have to battle other increases,” he says. “So if we can do anything to help offset some of that, we will. Maybe we can achieve that with some soil amendments that help decrease the raw nutrition demands.”

Pease believes that as more information about the effectiveness of organic amendments like biochar and humates on turfgrass becomes available, the more receptive LCOs — and their clients — may become.

“There are fewer people that know how to best care for their lawns, and they’re reaching out to professionals,” he says. “The numbers will stay the same, if not grow as far as the demand, in my opinion, because so many more people are getting further detached from any sort of agronomic knowledge as far as lawns go.”

Trust the process

Collinsworth believes the only way technology will continue to move the industry forward is with constructive criticism. He urges professionals to stay open-minded about technology. 

He admits that not every innovation will make a viable product but warns about what could happen if the industry shuts out new tech altogether.

“We should point out the flaws so the technology gets better,” he says. “But if we don’t keep encouraging investments to come into our industry, we’ll stop getting a lot of these cool innovations. If some of these companies aren’t successful, people might stop trying to invest in our industry. And I would hate to see that happen.” 

Seth Jones

About the Author:

Seth Jones, a graduate of Kansas University’s William Allen White School of Journalism and Mass Communications, was voted best columnist in the industry in 2014 and 2018 by the Turf & Ornamental Communicators Association. Seth has more than 23 years of experience in the golf and turf industries and has traveled the world seeking great stories. He is editor-in-chief of Landscape Management, Golfdom and Athletic Turf magazines. Jones can be reached at sjones@northcoastmedia.net.

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